Excise duty covers also categories of tobacco and nicotine products that are not harmonized throughout the European Union, such as the liquid used in electronic cigarettes - is not a taxable object in all Member States. The same refers to other modern alternative products, such as heated tobacco, nicotine pads and other tobacco substitutes. Otherwise, it also creates differences between countries in terms and conditions of market research and traceability of this product. Liquid used in electronic cigarettes in Latvia has been a taxable object since July 1, 2016, while heated tobacco from March 1, 2016, with a starting rate of EUR 62 per 1000 grams of heated tobacco, in turn, since January 1, 2021, the law “On Excise Tax” includes another new taxable object - a tobacco substitute product. Currently, the rate of excise duty is 80 euros per 1 kilogram of product, but the law includes transitional provisions, which envisage increasing this rate to 100 euros in 2022 and 120 euros per kilogram in 2023. Excise duty has number of objectives, including fiscal and public health improvement. As smoking has a serious impact on public health and the proportion of smokers in Latvia makes up almost a third of the population, it is necessary not to focus only on the fiscal goal. Based on the turnover indicators of alternative tobacco products and the analysis of the excise duty collected on these products, the authors point out that the tax increase does not ensure the improvement of public health and the consumption figures of these products do not correlate with the tax change. Moreover, the tax increase is not producing the expected results in reducing the consumption of smoking and alternative products. In addition, experience in other countries suggests that raising excise duties increases the risk of developing an illegal market, as new products are not harmonized across the EU and it is not possible to trace product purchases, including whether alternative tobacco products are purchased by minors. Problems also arise because there is no control over the conformity and quality of products and the tax gap is developing. According to surveys, the goal of buying e-cigarettes is mostly to quit smoking or switch to a safer way of smoking. Given the growing trends in the market for alternative products, it is not clear whether they attract only cigarette smokers or new users, and other measures are therefore needed to reduce smoking, such as intensified youth education campaigns. The authors have developed a methodology for determining the excise index for specific products, which could help to understand the further scenario of tax development. The results of the study indicate that alternative tobacco products have a negative excise index, so a significant tax increase may not produce the expected results. Instead, it is necessary to improve the possibilities for a more accurate and comprehensive analysis of the market for this product, while at the same time restricting the uncontrolled illegal market on the internet.